GE Betz, Inc. v. Moffitt-Johnston

• Decision Date: 13 March 2018
• Docket Number: No. 15-20008,15-20008
• Citation: 885 F.3d 318
• Parties: GE BETZ, INC., doing business as GE Water & Process Technologies, Plaintiff–Appellant, v. Michelle MOFFITT-JOHNSTON; AmSpec Services, L.L.C., Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

885 F.3d 318

GE BETZ, INC., doing business as GE Water & Process Technologies, Plaintiff–Appellant,

v.Michelle MOFFITT-JOHNSTON; AmSpec Services, L.L.C., Defendants–Appellees.

No. 15-20008

United States Court of Appeals, Fifth Circuit.

FILED March 13, 2018

Charlotte Ann Fields, Esq., Gieger, Laborde & Laperouse, L.L.C., Houston, TX, Neal Katyal, Hogan Lovells US, L.L.P., Washington, DC, Kenneth Hugh Laborde, Esq., Trial Attorney, Daniel Gibbons Rauh, Attorney, Gieger, Laborde & Laperouse, L.L.C., New Orleans, LA, for Plaintiff–Appellant.

David Leslie Barron, Esq., Cozen O'Connor, P.C., Houston, TX, for Defendants–Appellees.

Before HIGGINBOTHAM, OWEN, and ELROD, Circuit Judges.

PRISCILLA R. OWEN, Circuit Judge:

GE Betz, doing business as GE Water and Process Technologies (GE), appeals from the district court’s partial grant of summary judgment and award of attorneys’ fees in favor of its former employee Michelle Moffitt-Johnston and AmSpec Services, L.L.C. (AmSpec). We affirm the district court’s judgment in part but vacate the award of attorneys’ fees.

I

In 2009, after over a decade working for GE and its predecessor, Moffitt-Johnston became the first head of GE’s distressed fuels team, which performs "cargo treatments" for other companies. The cargo treatment process involves adding chemicals to fuel before export to comply with another country’s safety, environmental, or regulatory standards.

While employed by GE, Moffitt-Johnston executed an agreement governing the rights and obligations of GE and Moffitt-Johnston in the event the employment relationship ended. Among other provisions, the agreement contained a clause prohibiting Moffitt-Johnston from soliciting GE’s "customers" or "prospective customers" for 18 months following her termination or resignation. The agreement defined "customer" as any current GE customer with whom Moffitt-Johnston had contact or about whom she learned confidential information during the 18 months preceding her departure, and defined "prospective customer" as any entity whose business Moffitt-Johnston had taken certain steps to solicit. Accordingly, the non-solicitation clause was limited to customers and prospective customers of GE with whom Moffitt-Johnston actually worked during her employment with GE. On September 19, 2012, Moffitt-Johnston informed GE that she was resigning. She agreed to, and did, stay on for approximately one month.

At some point in late 2011 or early 2012, AmSpec decided to enter the cargo treatment industry. AmSpec had previously served as a third party inspector for some of GE’s cargo treatments. Shortly after Moffitt-Johnston informed GE that she was resigning, she spoke with AmSpec about joining the company to operate its new additives division, which would compete with GE in providing cargo treatments. By October 11, 2012, Moffitt-Johnston—while still working for GE—accepted an offer to lead AmSpec’s new division. Although she advised GE that she would be joining AmSpec, Moffitt-Johnston did not inform GE, and in fact repeatedly denied, that she would be competing with GE in her new role. Had she revealed that she would be competing with GE, GE’s standard practice would have been to deny Moffitt-Johnston access to GE’s data network and her employment likely would have been terminated immediately.

Moffitt-Johnston’s computer activity in the weeks leading up to her departure was highly suspicious. GE installs monitoring software on the computers of all GE employees, which captures and logs certain actions taken, including emails sent and files copied to external hard drives. According to a report generated by the software on Moffitt-Johnston’s computer (the DLP report), on September 24, 2012, days after she announced her resignation, someone using Moffitt-Johnston’s computer downloaded over 27,000 files to an external hard drive. The circumstances of this download are disputed; Moffitt-Johnston offered evidence that the download was initiated by GE’s Information Technology department in the course of backing up her computer, while GE offered evidence that Moffitt-Johnston was in possession of the computer at the time of the download and therefore conducted it herself. Subsequently, on October 9, 2012, another download was attempted to the same external hard drive but was blocked by exit controls that had been installed on Moffitt-Johnston’s computer in the interim. The user attempting to the download the data could have entered a valid business justification that would have allowed the download to proceed, but instead abandoned the effort. Additionally, according to the DLP report, in the days prior to her departure, Moffitt-Johnston sent GE files via email to herself at outside email addresses.

AmSpec’s entry into the cargo treatment market was "effectively announced" at the October 19, 2012 New York Harbor Show, an annual industry social event jointly hosted by GE and AmSpec. Having officially left GE two days prior, Moffitt-Johnston attended the event as a representative of AmSpec and was observed speaking with at least two GE customers, though the nature of these conversations is unknown. Over the next year, many of the customers to whom AmSpec provided cargo treatments had been customers of GE to whom GE had provided cargo treatments during the year preceding Moffitt-Johnston’s departure.

Based on Moffitt-Johnston’s failure to disclose that she would be working for a competitor, alleged downloads of GE files, and alleged solicitations of GE customers, GE filed suit against Moffitt-Johnston and AmSpec, asserting 13 causes of action including, relevant here, breach of a covenant not to compete, misappropriation of trade secrets, and tortious interference with prospective business relationships. AmSpec and Moffitt-Johnston subsequently moved for summary judgment with respect to all 13 claims. GE filed a response, and AmSpec and Moffitt-Johnston moved to strike the DLP report, upon which GE had relied extensively in its response. The district court granted the motion to strike, ruling that the DLP report was a summary of evidence and that GE had not complied with the requirements of Federal Rule of Evidence 1006. The district court then granted summary judgment in favor of AmSpec and Moffitt-Johnston as to most of the causes of action alleged.

The case proceeded to trial on the remaining claims—breach of fiduciary duty, fraud, and unfair competition—limited to allegations that Moffitt-Johnston concealed her intention to work for a competitor. At trial, the district court allowed the DLP report to be admitted into evidence. The jury found liability as to all claims presented to it but awarded no damages. Subsequently, the district court awarded $217,189 in attorneys’ fees to Moffitt-Johnston for her defense against the breach of the non-solicitation agreement claim.

GE appeals the summary judgment the district court granted in favor of Moffitt-Johnston and AmSpec regarding the non-solicitation agreement and the district court’s denial of GE’s motion for summary judgment regarding its claims for breach of a non-solicitation agreement, tortious interference with prospective business relationships, misappropriation of trade secrets, and three related causes of action. GE also appeals the award of attorneys’ fees to Moffitt-Johnston.

II

With regard to GE’s claim that Moffitt-Johnston breached the non-competition agreement, the district court concluded, in the alternative, that GE put forth no evidence of breach. We agree.

GE acknowledges that it has no "smoking gun" that Moffitt-Johnston solicited any former clients, arguing instead that "an extensive mosaic of facts ... establishe[s] a strong circumstantial case." GE offers four categories of evidence it believes collectively support an inference that Moffitt-Johnston solicited former customers of GE while working for AmSpec. This court "review[s] a grant of summary judgment de novo, applying the same standard as the district court and viewing the evidence in the light most favorable to the non-moving party."¹

First, GE points to the fact that Moffitt-Johnston downloaded over 27,000 GE files prior to departing, many of which contained client information, then lied about working for a competitor, supporting an inference that her motive was to "deprive GE of the opportunity to shore up its customer relationships before she could solicit their business." The contention that Moffitt-Johnston must have solicited clients because she allegedly misappropriated files with their information amounts to speculation.

Second, GE references two incidents it believes constitute solicitations themselves. Specifically, at the 2012 New York Harbor Show, Moffitt-Johnston was observed speaking with two GE customers. However, there is no evidence as to the content of those conversations. While the event’s purpose was business development, there is evidence in the record that it was also largely a social affair to which spouses and "significant others" were invited for dinner and a cruise. As the district court observed, the non-solicitation covenant does not prohibit Moffitt-Johnston from speaking with any former clients; it prevents her from soliciting them "regarding products or services that are similar to or competitive with those [she] gained knowledge of while employed by [GE]." The district court held that GE’s belief that Moffitt-Johnston solicited customers at the New York Harbor Show is "mere speculation." With no evidence that Moffitt-Johnston spoke with the clients at issue about AmSpec’s services or even anything industry-related during this event, the district court’s conclusion was correct.

GE also cites evidence suggesting that a representative of one of GE’s customers, Statoil, had communications with Moffitt-Johnston. GE argues that it is reasonable to infer from context that they spoke about business because an employee of this customer later told a GE employee, Kevin Kurtz, that he would "have to speak to"...